Dart Group PLC Company Reports

Business and Financial Review

The Group comprises three principal operating
businesses; Leisure Airline, Package Holidays
and Distribution & Logistics. The Package
Holidays and Leisure Airline operations work
closely together to provide a range of leisure
travel services to our Northern customers.

2011/12 performance

The Group's financial performance for the
year to 31 March 2012 is reported in line with
International Financial Reporting Standards
("IFRS"), as adopted by the EU, which were
effective at 31 March 2012.

Overall Group turnover increased by 26% to
£683m (2011: £543m), with growth in all
segments, including a 140% rise in Package
Holiday revenues. However, despite improved
trading in both Distribution & Logistics and
Package Holidays, Group profit before tax grew
by only 7% to £28.1m (2011: £26.2m). This
decrease in the Group's profit margins was
driven by reduced profitability in the Leisure
Airline business, principally as a result of fuel
cost rises. Group EBITDA was similarly impacted,
falling by 2% to £62.9m (2011: £64.2m).

The Group's effective tax rate of 19% (2011:
34%) was lower than the headline figure,
as the reduction in the corporation tax rate
decreased the Group's deferred tax liability.
The Group generated net cash inflows1 of over
£45m in the year (2011: £54.6m), resulting in
a positive net cash position, including money
market deposits, of £152m (2011: £106.8m)
as at 31 March 2012. Total cash received
from Jet2holidays and Jet2.com customers
in advance of their trips, amounted to £180m
(2011: £135m) at year end. The Group's cash
generation was principally driven by the Leisure
Airline division, which continues to benefit from
strong forward bookings, with Package Holidays
also generating strong early season cash flows.
The working capital related cash improvement
reduced, year-on-year, in line with lower growth
in the summer 2012 flying programme – a
10% increase in airline capacity relative to a
28% increase in summer 2011.

Capital expenditure reduced from £68m to
£47.3m; the previous year's expenditure
having included the acquisition of the Hub,
Fowler Welch's North West distribution centre,
and an above average number of Boeing 757
engine overhauls. This year's capital
expenditure included the purchase of five
Boeing 737-300s, enabling the fleet to be
increased to 42 aircraft to meet the needs of
the summer 2012 programme, and further
investment in Fowler Welch infrastructure.
Three leased aircraft were returned during the
winter months.

The Group's balance sheet continues to
strengthen, driven by both profit performance
in the year and cash generation from
advance bookings.

The resulting increase in shareholders' equity,
the improved gross cash position and the
increase in non-current assets are the principal
changes in the balance sheet from the previous
year end. The overall increase in shareholders'
equity does not equate to the Group's post
tax profit for the year, due to a reduction in
the market value of outstanding fuel and
currency hedges at the year-end relative to
the previous year. The business continues
to be funded in part by customer payments
received in advance of travel from our leisure
customers. Deferred revenue grew 45% yearon-
year, as the Group's leisure travel businesses
continue to enjoy strong forward bookings.

1 Cash inflows are reported including money market deposits (cash
deposits with maturity of more than three months) to give readers an
understanding of total cash generation. The Consolidated Group Cash
Flow Statement reports the net cash flow excluding these deposits.

Segmental Performance

Leisure Airline

The Leisure Airline division trades under the
Jet2.com brand and operates scheduled
flights to a range of leisure destinations from
its home base at Leeds Bradford International
Airport, and Belfast, Blackpool, East Midlands,
Edinburgh, Glasgow, Manchester and
Newcastle airports.

Total Leisure Airline turnover, including sales
of seats to Jet2holidays, increased by 25% to
£461m (2011: £369m) as a result of a 27%
growth in scheduled passengers to 4.3 million,
with retail revenue growth (2012: £27.86 –
2011: £25.84) offsetting the per passenger
decline in ticket revenue yield (2012: £51.47
– 2011: £52.42). Like-for-like Charter revenues
increased year-on-year reflecting additional
winter flying in part offset by the decision not
to undertake passenger charter flights during
the peak summer flying months.

Profitability declined by 10% to £21.7m
(2010/11: £24.1m); this reduced margin was
principally a result of cost increases which
we were unable to pass on to our customers.
Overall, costs grew by 21% as a result of a 24%
per tonne increase in aviation fuel and volume
driven increases.

During the year, Jet2.com continued its
careful expansion of the scheduled airline
network, adding Glasgow airport as a new
base and extending its flying programme at
East Midlands, Newcastle and Manchester
airports, largely by adding flights to tried and
trusted Jet2.com destinations. We operated a
total of 145 routes in the year, adding the new
destinations of Bodrum and Krakow.

Overall scheduled airline seat capacity was
increased by 23% in the year. Despite this
significant expansion, careful route scheduling
and capacity management coupled with some
improvement in customer demand, resulted in
load factors increasing to 87% (2011: 85%). Load
factor performance was underpinned by further
development of the airline's yield management
system and by the sale of seats both to
Jet2holidays and third party tour operators.
Seat sales to Jet2holidays represented 10%
of total scheduled flying in the year. Net ticket
revenue reduced slightly to £51.47 from £52.42.

Retail revenue per passenger increased to
£27.86 from £25.84. This was generated from
a number of sources including hold baggage
charges for a sector leading 22kg weight
allowance, online seat assignment, extra leg
room seats, onboard sales and commissions
on car hire and insurance. New developments
in the year included a redeveloped travel
insurance product – the best value in the
market, and further development of dynamic
pricing for retail revenues.

In order both to improve customer service
and increase efficiency, we brought passenger
handling in-house at Blackpool airport and
Newcastle airport for summer 2011 with Faro
airport following for summer 2012, the fifth
overseas base at which we self handle.

Revenues in Jet2.com's passenger and Royal
Mail charter operations were up on the previous
year. The passenger charter activity provides
flights for many different customers, including
tour operators, specialist holiday providers, the
UK Government, and in support of promotional,
sporting and other events, enabling the business
to improve utilisation of aircraft outside peak
periods. We operated approximately 600
passenger charter flights during the year
including a series of regular flights during
the winter months for the Emirate of Ras al-
Khaimah, flying German holiday makers into this
relatively new resort. We continue to undertake
significant flying for Royal Mail, for whom night
mail flights are undertaken every weekday from
six UK airports, performed with industry leading
punctuality levels, enabling Royal Mail to meet
its universal service obligation.

Jet2.com continues to improve its fuel efficiency
by means of its wide-ranging "efficient flying"
programme. This programme looks at all
aspects of the airline's operation which can
influence or directly impact upon the operational
efficiency of its flying activities. The combined
effects of all the elements of this scheme are
estimated to have saved the airline over 34,000
tonnes of carbon emissions in the year.

Jet2.com now operates a fleet of 42 aircraft
having acquired five Boeing 737-300 aircraft
and leased two Boeing 737-800s towards
the end of the financial year. Three leased
737-300 aircraft were returned at the end of
their leases during the year. Jet2.com
will continue to add to its owned and leased
fleet in line with customer demand from our
Northern based seat-only and package holiday
customers. Seat capacity has been increased
by 10% for summer 2012, with growth focused
on tried and trusted, good value destinations.

Segmental Performance

Package Holidays

Jet2holidays is the Group's package holiday
operator; it is an integral part of the Group's
leisure travel activities, working closely with
Jet2.com to provide ATOL protected holidays
to a wide range of destinations from our eight
Northern UK airports.

Jet2holidays revenue increased by 140% to
£115m (2011: £48m). This has been largely
driven by growth in customer numbers, with
over 216,000 customers travelling in the year
(2011: 98,000). Revenue growth has also been
driven by a move to "all inclusive" and "half
board" holidays, and increased retail revenues
for products sold through the Jet2holidays
booking process, including in-flight meals and
extra leg-room seats.

The increasing scale of the business has enabled
us to improve both operating margins and
profitability. Despite the challenging economic
environment and competitive pressures, gross
margins per holiday have been maintained
through careful management and further
enhancement of the Package Holidays yield
management system. Jet2holidays moved into
profitability this financial year, with operating
profit improving to £2.5m (2011: loss £0.5m).

This growth is substantially a reflection of
the successful further development of the
Jet2holidays hotel product range and a fully
integrated approach with Jet2.com. During
the year, the range of hotels on offer has
increased to over 1,600 properties; 1,200 of
which have been directly contracted by our
in-house team. The product range is focused
on "all inclusive" and "half board" holidays,
meeting our customers' demand for great
value. Our customers have also had the
opportunity to select "5 star" accommodation
under our "Indulgent Escapes" brand.

Jet2holidays are sold over the internet, through
high street and online travel agents, and from
our UK based call centre. The Jet2holidays
website is being continuously developed to
improve the quality of both the customer and
the trade booking experience. Both visits and
conversion levels are significantly higher than
the previous year. Sales through travel agents
remain an important element of the business
and Jet2holidays can now be booked through
most major travel agent consortia, multiples,
homeworker companies and key independents
in the UK. Further investment was made in
our UK based call centre to enable it to handle
call volume growth, which has continued
into the summer 2012 booking season.

Looking forward to the year ending 31 March
2013, the business expects further substantial
growth in customer numbers. The product
offering, which now includes free child places
at hundreds of hotels, is very attractive in the
current environment. We continue to invest
significant sums in marketing, focusing in
particular on TV and online media, to increase
brand and product awareness. This continued
investment in the product, together with the
opportunity to cross sell to Jet2.com scheduled
service customers, means that we remain
confident in delivering continued growth. Our
direct relationships with our hotels and the
focus on Jet2holidays as part of Jet2.com's
overall capacity planning will ensure that we
have the product and capability to meet our
predicted increases in demand

Segmental Performance

Distribution & Logistics

The Group's distribution business, Fowler Welch,
is one of the UK's leading logistics providers
serving UK retailers, importers and manufacturers.
The business operates from 13 regional
distribution centres and offers a range of logistics
solutions, including storage, case pick-to-order,
and national distribution of both temperaturecontrolled
and ambient products.

The business successfully completed a
number of significant changes in the year,
whilst maintaining growth in revenue of 6% to
£152.4m. Operating profit increased by £1.5m
to £4.3m. The business faced a number of
cost challenges, in particular related to energy
and insurance rates, as well as continued price
pressure from customers.

Key network developments included the
successful streamlining of operations at the
Hub in Heywood (Greater Manchester) from a
challenging implementation in the previous
year; the successful start-up of the Newton
Abbot (Devon) site; and the rationalisation of our
Container operations as a result of choosing to
cease trading at Felixstowe. These changes,
together with continued, customer focused,
quality service at our established sites, give
Fowler Welch the platform for a period of
continued organic growth.

Our key Spalding site achieved lower gross
margins in the year due to lower revenues and
reduced sub-contractor availability. However,
the outlook for the site is very positive for
the coming year. Investment in the site has
increased our capacity by 250,000 cases per
week, all of which has already been sold to
existing and new customers.

The successful implementation in July 2011 of
a new 15,000 sq ft cross-dock distribution site
in Newton Abbot, to extend our TESCO express
store distribution model, will act as a platform
for growth in the South West region in the
coming year.

Washington, Kent and the South Coast all
enjoyed good gross margins, with operations
experiencing high utilisation throughout the
year, on the back of strong revenues.

The Ambient operation at the Hub in Heywood
saw slower than planned revenue growth,
but gross margin performance improved
significantly year-on-year. Emphasis on
service has been a high priority, following the
site's challenging implementation in 2010;
the growing reputation of Fowler Welch in
the Ambient sector will enable continued
growth in the coming years. This success was
underlined by being awarded the ASDA "carrier
of the year" award for 2012.

In June 2011, Fowler Welch reduced the scale
of its container business, closing its Felixstowe
operation. Key customers were, however,
retained and these are now serviced from a
new site, located at Alconbury on the A1 in
Cambridgeshire.

The new business model for distributing
containers contributed to the overall
improvements in miles per truck and an overall
reduction in tractor unit numbers. This has
also been a tactical approach, to ensure that
increased fleet flexibility is maintained in this
difficult trading environment.

Investment in both IT and management
infrastructure continues as a high priority. A
new transport management system has been
selected for implementation in the current
financial year and the management team
has been strengthened with a number of key
appointments. These investments are focused
on improving operational efficiency in order to
improve gross margins.

Fowler Welch is looking forward to a
successful year, with a number of new
contracts with a variety of temperaturecontrolled
and ambient customers already
underway. This includes Winterbotham
Darby in Teynham (Kent) and new volume
awarded by an existing Blue Chip client at the
Desborough (Northamptonshire) operation.
Growth will be carefully managed to ensure
all synergies with our existing customers
and operations are fully exploited.

Principal risks and uncertainities

The Group's strategy is to grow its business
through a combination of organic expansion
and, if appropriate, carefully planned
acquisitions in areas related to its existing
businesses and markets. The principal risks
and uncertainties facing the business include
the following:

Competition

The Group is impacted by competitor
activity in each of its business areas. In the
Distribution business, the market has seen
some consolidation as smaller players either
exit the market or are taken over. The loss of
a substantial customer is the largest financial
risk facing the company. This risk is mitigated
by Fowler Welch's focus on service levels
and cost control, both of which are critical to
success in this sector.

The Leisure Airline and Package Holidays
sectors continue to be intensely competitive
market places. Headline fare price competition
remains very strong at every base from which
Jet2.com flies. The Group will continue to
focus on customer driven scheduling on
popular routes in order to maximise its load
factor, yield, and retail revenue on its aircraft.
The operation will continue to benefit from
non-scheduled flight aircraft utilisation through
its passenger and freight charter activities
and from a broad distribution base for its
scheduled seats via the web, through travel
agencies, via tour operator seat allocations
and to its in-house tour operator. Jet2holidays
competes effectively through the provision of
a broad range of great value package holidays
accessible from all of our eight Northern bases

Fuel prices

The cost of fuel will continue to be a very
significant element of the Leisure Airline and
Package Holidays cost bases, and the effective
management of fuel price variation will
continue to be important to the businesses.
The Group's fuel price risk management
strategy aims to limit the exposure of both
businesses to sudden and significant increases
in oil prices, whilst ensuring the businesses
remain competitive.

The Distribution & Logistics business is not
directly affected by such price rises, since
contracts allow for increases to be passed on to
its customers.

Economic conditions

Ultimately, economic conditions will have
an impact on the level of consumer demand
for the Group's Leisure Airline and Package
Holidays services. Whilst we believe that UK
consumers regard their summer holiday as
a very important element of the household
budget, it is clear that there has been a
reduction in discretionary travel in recent years
due to continuing economic uncertainty. To
mitigate this risk, the Group will continue to
plan its flying programme carefully to take
account of trends in demand. Expanding
the Jet2holidays offering also enables the
Group to increase revenues from our
Jet2.com customers.

Political risks

The Leisure Airline and Package Holidays
businesses can be impacted by political
uncertainty, both directly through reduced
demand for travel to countries to which
Jet2.com flies, and indirectly through the
impact of such political uncertainty on fuel
prices and exchange rates. This risk is mitigated
through careful management of the route
network and through the Group's approach to
hedging fuel and foreign exchange risk.

Environmental risks

As evidenced in recent years, the Leisure
Airline and Package Holidays businesses are
at potential risk from the force of nature, such
as extreme weather conditions and volcanic
activity. The business mitigates against this
risk by establishing and regularly updating a
carefully planned response to be implemented
by a team of experts, should there be
significant disruption to our flying activity. The
Group maintains prudent levels of liquid funds
to enable the business to continue to operate
through a period of sustained disruption to the
flying programme.

Government policy

It is stated UK and EU policy to apply additional
taxes to the aviation industry, and it is
foreseeable that the tax burden will continue
on the road haulage sector also. It is clear
that the increases in Airline Passenger Duty
had an impact on flights to Egypt, prior to
the subsequent political uncertainty which
caused Jet2.com to suspend flying to Sharm
el Sheikh and Hurghada in February 2011. The
EU Emissions Trading Scheme commenced
in 2012, as did further increases in Airline
Passenger Duty. There is a continuing risk
that the imposition of these taxes, at levels in
excess of the economic cost of emissions, may
result in reduced passenger demand.

Treasury management

Liquidity risk

Liquidity risk reflects the risk that the Group
will have insufficient funds to meet its financial
obligations as they fall due. As at the year
end, the Group had significant cash balances,
together with a range of unutilised banking
facilities, and had met all banking covenants.
The Group's strategy for managing liquidity risk
is to maintain cash balances in appropriately
liquid form and in accordance with approved
counterparty limits, whilst securing the
continuity and flexibility of funding through the
use of committed bank facilities. Additionally,
short term cash flow volatility risk in relation
to margin calls in respect of fuel and foreign
exchange hedge positions is minimised
through diversification of counterparties and
appropriate credit thresholds. The Group seeks
to match long term assets with long term
liabilities wherever possible. In addition, a
regular assessment is made of future covenant
compliance and headroom.

Fuel, currency and carbon hedging

The Group utilises foreign exchange and fuel
forward contracts to hedge its exposure to
movements in US dollar and euro exchange
rates, and to jet fuel prices arising as a result
of its Leisure Airline activities. The Group's
treasury policy permits the use of such
instruments to manage fuel price and currency
risk only. The Board reviews and agrees this
policy for managing each of these risks at
least annually; these policies have been
consistent during the year. It is the Group's
policy that no trading in financial instruments
shall be undertaken.

Details on derivative transactions outstanding
at the year end relating to forward currency
contracts, cross currency swaps and aviation
fuel swaps are detailed in note 22 to the
Consolidated financial statements.

The policy in relation to fuel and foreign
currency hedging is summarised below:

Aviation fuel price risk

The Group's policy is to forward cover future
fuel requirements up to 100% and up to
three years in advance. The magnitude of
the aviation fuel swaps held is given in note
22 to the Consolidated financial statements.
As at 31 March 2012, the Group had
hedged substantially all of its forecast fuel
requirements for the 2012/13 year and a
proportion of its requirements for
the subsequent two years, in line with the
Board's policy.

Foreign currency risk

The Group has significant transactional foreign
currency exposure, the most significant being
the US dollar and the euro.

Transactional currency exposures primarily
arise as a result of purchases in foreign
currency undertaken in the ordinary course of
business, in particular related to expenditure
on aviation fuel, aircraft maintenance, air
traffic control, airport charges and hotel
accommodation. The Group's policy is to cover
all material transactional risks for a minimum
period of six months, using forward foreign
exchange contracts. As at 31 March 2012, the
Group had hedged a large proportion of its
forecast foreign exchange requirements for the
2012/13 year. The magnitude of the foreign
currency exchange risk is given in note 22 to
the Consolidated financial statements.

Structural currency exposures exist where the
Group has a small euro exposure in respect of
net overseas investment. However, as these
exposures are not material, no hedging has
taken place.

The Group also hedges its carbon exposure
given the commencement in 2012 of the
EU Emissions Trading Scheme. It has acquired
all of its requirement for the year ending
31 December 2012 and approximately 60% of
the following year's requirement.

Capital risk management

The Group's objective when managing capital
is to safeguard the Group's ability to continue
as a going concern whilst providing a return
to shareholders. The Group maintains a
conservative approach to dividend policy,
ensuring funds are retained to support further
business growth. Our multi-year planning
process ensures that we have clear visibility of
earnings and liquidity to ensure we continue to
operate well within bank covenant levels.